Question

although activity-based depreciation methods are theoretically superior to time-based methods, activity-based methods are (select all that apply.) multiple select question. too costly to use. difficult to apply in practice. not allowed by gaap. only permissible for manufacturing firms

Answer 1

Activity-based depreciation methods are more costly and difficult to use. Thus, the correct options are (a) ‘too costly to use’ and (b)  ‘difficult to apply in practice’.

The activity-based depreciation methods link the costs of assets with their output/production levels over a period of time. Although activity-based depreciation methods are theoretically more efficient than time-based depreciation methods, still they are not widely used in practice it is because of their high cost and level of difficulty.

For example, for the assets like machineries where productivity can be measured by the units of production and amout of time of production. It is simple to measure the production time than to determine the units of production.

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